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REIT Pays 'High Price' of Tenant's Bankruptcy

DEERFIELD, IL-Clinical diagnostic company Dade Behring emerges from bankruptcy with a new 10-year lease at a savings of $3 per sf--and on 107,000 sf rather than the 137,000 sf it had been obligated to occupy at 1717 Deerfield Rd.

By Mark Ruda | Updated on November 06, 2002

DEERFIELD, IL-Dade Behring’s recent lease restructuring at 1717 Deerfield Rd. provides an object lesson in the high cost of tenant quality and bankruptcy. Although the clinical diagnostic company has emerged from bankruptcy, it comes at a cost of $1.2 million a year for Dallas-based Prentiss Properties Trust.

“Credit is going to be a continuing, if not increasing, problem,” says president and chief executive officer Thomas F. August in a recent earnings conference call. “It’s an issue all landlords will have to address.”

Prentiss Properties Trust began addressing Dade Behring’s financial woes in July, when they learned from the company it was soon filing a pre-packaged bankruptcy petition that would trade $1.4 billion in debt for the company’s common stock, August reports. If Prentiss Properties declined to renegotiate the lease on the 137,000-sf building, Dade Behring could have rejected the lease in bankruptcy proceedings, August says. “We had little leverage,” he adds.

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